Governance and Shareholder Response to Appointment of a Chief Risk Officer
The Geneva Papers, Vol. 37, pp. 108-124, 2012
36 Pages Posted: 22 Mar 2012 Last revised: 13 Apr 2012
Date Written: March 22, 2012
This study examines the recent, significant growth in the appointment of CROs, the role of the CRO, and whether such appointments benefit shareholders. We find that the market is more likely to react positively to an appointment of a CRO the weaker a firm’s corporate governance. In particular, lower the proportion of outside directors the greater is the likelihood of a positive market reaction to the appointment of a CRO, suggesting the shareholders associate the position with better future governance. Finally, firms with higher tax and product risk also experience increases in stock prices when they appoint CROs.
Keywords: Risk management, ERM, governance, Chief Risk Officer
JEL Classification: G30, G20, G14
Suggested Citation: Suggested Citation